Accounting principe of income statement
Income statement is prepared to calculate income of a certain period. The main principles are as under:
(1) Fixed Period Principle: According to this principle, every organisation during a particular period should prepare income statement or Profit and Loss account. This duration comprised generally of a year or in certain circumstances, it can be less than a year. In that statement, each income and all related expenses and gains or losses should be shown.
(2) Principle of Income Priority: According to this
principle, the main revenue and other revenues of business are to be shown separately. The revenue related to sale ornrevenue from service consideration should be given more importance.
(3) Principle of Non-repetitive Income and Expenses: According to this principle, the non-repetitive income and expenses are to be shown in Profit and Loss account and the amount to be written-off is calculated by dividing the amount by the expected number of years.
(4) Principle of Accounting of Cost and Expenses:
According to this principle, the following items are to be included in cost and expenses:
(i) Operating Cost,
(ii) Loss of stock in the period,
(iii) Depreciation amount,
(iv) Arrangement of loss on doubtful and other current assets.
(5) Principle of Calculation of Net Income: According to this principle, Profit and Loss account or Income Statement is to be prepared in such a manner that no adjustment should be left after calculating the profit. If any adjustment is necessary, then adjustment of small amount should be done from current income and of large amount from the surplus of accrued income.